INTRODUCTION TO INCOME TAX

 INTRODUCTION TO INCOME TAX -India

Tax:an overview. Tax is a fee charged by a Government on a Product, Activity or Income. There are

two types of Taxes- Direct taxes and Indirect taxes. If the tax is directly levied on the income or wealth of a person then it’s called direct taxes, Eg. Income Tax. If tax is levied on the price of a product, good or service then it’s called indirect tax, Eg. Sales tax. Taxes are the basic source of income for governments for meeting expenses of like education, defence, health care, infrastructure etc.

Income tax.

Income tax is a form of direct tax, i.e, it is levied directly from the tax payer on his ‘income’.Every person, whose taxable income for the assessment year exceeds the minimum taxable limit, is liable to pay the income tax at rates in force during the current financial year.

The Income Tax Act ,1961, which came into force on 1st April 1962 is the base act

regarding income tax in India. Since 1962 it has been amended and re-amended drastically.

Union finance budgets of every year propose new amendments and tax reforms and these

changes get added to the income tax rules when the parliament approves it. Total income and tax payable. Income tax is levied on the total income of the assesse. Total income is computed as

per the provisions of the income tax Act, it is the amount arrived after deductions from

gross total income are made. The procedure of computation of total income is given below-

Basis of charge and general rules of income tax

 Income tax is an annual tax on income.

 Income of previous year is taxable in the next following assessment year at the rates

applicable to the assessment year.

 Income tax rates are fixed by the annual union budget(Finance act).

 Tax is charged on every ‘person’ defined in sec2(31).

 The tax is charged on the total income of every person computed in accordance with

the provisions of Income Tax Act.

 Income tax is to be deducted at source or paid in advance as provided under the

provisions of the act.

Important amendments for the Annual Year 2016-17

 Rate of surcharge increased to 12% from 10% for all non-corporate assessees if

income exceeds 1 Crore.

 Wealth tax abolished from annual year 2016-17.

 Yoga will be included under the definition of ‘charitable purpose’ and such

organisations will be considered as charitable institutes.

 100% deduction under section 80G for contributions made to Swatch BharathKosh and

Clean Ganga Fund.

 Investment made under newly introduced SukanyaSamriddi account will be eligible

for deduction u/s 80C.

 The existing limits of 15,000 and 20,000 u/s 80D with respect of mediclaim paid

by individuals and senior citizen raised to 25,000 and 30,000 respectively.

 The 80DDB deduction for Super senior citizen regarding expenditure of medical

treatment of specified diseases increased to 80,000 from 60,000.

 Exemption u/s 80DD with regard to maintenance of disabled dependant raised to

75,000 or 1,25,000 (disability or severe disability) from 50,000 and 1,00,000.

 Limit u/s 80U is proposed to be increased from 50,000 to 75,000 in case of

disability and from 1,00,000 to 1,25,000 in case of severe disability.

 Deduction u/s 80CCC is proposed to increase from 1,00,000 to 1,50,000 in case of

contribution made to pension fund.

 Deduction u/s 80CCD will be 1,50,000 in place of 1,00,000 to contribution made

to national pension scheme.

 TDS will be introduced to immovable property transactions.

 100% deduction will be allowed u/s 80G in respect of donations made to National

Fund for Control of Drug Abuse (NFCDA).